When you think about investments, mutual funds top the list. From beginners to retiring professionals, everyone prefers mutual funds. It is a pool of funds collected from multiple investors which later gets invested in assets like stocks, bonds, and other money market instruments. The Asset Management Companies (AMCs) handle mutual funds. Each AMC typically manages several mutual fund schemes.
Hunting for best mutual funds is a tedious task owing to its popularity. You should be aware of the mutual fund category before investing in one. Broadly, there are three types of mutual funds –
1) Equity funds are ideal for those who carry high-risk appetite and have an investment horizon of 5 years
2) If you have a moderate risk-appetite, hybrid funds are perfect
3) If you are a risk-averse individual, go for debt funds. However, all mutual funds, even debt funds, carry some level of risk
What are the ways to invest in mutual funds?
Invest in the best mutual funds in the following ways:
1) Offline investment with a fund house: You can invest in a mutual fund scheme by visiting the nearest fund house branch office. Ensure to carry a copy of the said documents –
• Address proof
• ID proof
• Cancelled cheque
• Passport size photo
The fund house provides an application form along with which you need to furnish the mentioned documents.
2) Investment through a broker: A broker is someone who will help you through the entire mutual fund application process. They offer you all the information regarding the application such as features of various schemes, papers, etc. They provide guidance on the best mutual funds to invest in. However, they charge a fee for the same which gets deducted from your total investment amount.
3) Online through the fund website: Most fund houses are opting for online route. You only have to follow the instructions provided on the fund house portal, fill the necessary information, and submit. You can also complete the e-KYC process online. For this purpose, you need to enter the Aadhaar and PAN. Once the fund house completes the verification process, you can begin investing. The online investment process is quick, easy, and hassle-free.
4) Mobile app: Many fund houses allow investments through the smartphone as well. You only have to download the app on your device. It enables you to invest in several schemes, buy or sell units, view account statement, and conduct other such portfolio related services.
Why to invests in mutual funds?
The reason why mutual funds are the go-to investment option are:
1) They are managed by professionals who research and keep track of markets, identify the stocks, and buy and sell them at appropriate times. This provides you favourable returns
2) Mutual funds offer higher returns compared to fixed deposits, recurring deposits, etc. Equity mutual funds give opportunity to investors to enjoy high returns, but at the same time, they are accompanied by high risks. Debt funds, on the other hand, carry low risk and fetch better returns
3) One of the biggest benefits of mutual funds is the diversification it offers. You can reduce the risk level by investing in various assets and stocks
4) Investing in best mutual funds is quick, hassle-free, and simple. You can either opt for offline, broker, online, or smartphone route
5) You can invest in mutual funds either INR 5,000 (lump sum) or INR 500 (SIP method)
6) You can cultivate regular saving habit using the SIP method. Here investors invest on predetermined time for a pre-fixed amount. The money gets auto-debited from the account
About the author: Nirav Desai is a financial advisor and has a 10-year plus experience of working in a reputed mutual fund company. In this article, he has researched on best mutual funds and explained four ways to invests in them